Insolvency of insurers

Obligations of the Financial Services Compensation Scheme

In the January 2004 issue of Insurance Law Monthly, there was discussion of the decision of Davis J in R (on the application of Geologistics Ltd) v Financial Services Compensation Scheme [2003] EWHC 629 (Admin). The Court ruled that the Scheme was, under the Policyholders Protection Act 1975, liable to indemnify the policyholder of an insolvent liability insurer for the first party defence costs incurred by the policyholder, as well as the damages and costs awarded against the policyholder in favour of the claimant third party. That decision has now been upheld by the Court of Appeal in R (on the application of Geologistics Ltd) v Financial Services Compensation Scheme [2003] EWCA Civ 1877, forthcoming in [2004] Lloyd’s Rep IR.